Tesla Motors Inc.
reported second-quarter earnings after the bell Wednesday, detailing a second-quarter loss of $184.3 million, or $1.45 a share, on revenue of $1.2 billion; after adjustments, Tesla said losses were $61 million, or 48 cents a share. Analysts polled by FactSet expected the electric-car maker to report an adjusted loss of 60 cents a share, its third consecutive quarterly loss, with revenue of $1.19 billion. MarketWatch live-blogged the conference call.

Wall Street has turned more cautious on Tesla recently due to the stock\’s high valuation and the company\’s ambitious plans. Tesla shares have gained 21% so far this year, 10 times more than the S&P 500 index.

Tesla has said it wants to deliver 55,000 this year. That implies a pretty steep ramp up for the second half of the year:

Tesla delivered 10,045 cars in the first quarter and 11,507 in the second quarter, so it is 33,448 cars short of the 2015 target.

That’s nearly 17,000 cars for third and fourth quarter, just as the Model X comes to stores.

Musk said in July the company was on track to meet that goal, having delivered more Model S cars in the April-June period than it had expected. Tesla had forecast 10,000 to 11,000 cars for the second quarter.

I’m hoping for a hard release date for the Model X today from Tesla – To have nay chance of hitting 55K deliveries this year, Tesla has to get its next car rolling out to buyers by the end of this quarter.

“While our equipment installation and final testing of Model X is going well, there are many dependencies that could influence our Q4 production and deliveries. We are still testing the ability of many suppliers to deliver high quality production parts in quantities sufficient to meet our planned production ramp.”

“In addition, the timing of the Model X production ramp and high total deliveries in Q4 create operational challenges for our delivery organization towards the end of the year. This adds complexity in predicting our delivery rate with precision.”

Well, at least all is well with Tesla Energy, Tesla’s stationary battery business.

“We are on track to start production of Tesla Energy products this quarter at our Fremont factory, with a plan to ramp up production in Q4. As a result, we expect Q3 services and other revenue to grow modestly and gross margin to be comparable to Q2. We expect to further expand Tesla Energy battery module and pack production at the Gigafactory in Q1 2016 on a more automated line, where construction remains on plan.”

Here is the early report on Tesla’s earnings, which includes fact that Tesla is backing off its estimate of 55K deliveries this year. This is not a surprise, even though Elon Musk was VERY adamant about it earlier in the year.

Elon Musk, in Tesla’s February conference call:“Even if our sales in China were zero this year, I’m still confident we could do the 55,000 cars.” He even said that the number could be higher if the Model X ramp went well.

Tesla’s next car after the Model X, the Model 3, will have its design debut in the first quarter of 2016 and begin deliveries in late 2017, letter says. That is the car Tesla hopes will be priced more for general consumers.

Those “should grow roughly 5-10% sequentially in Q3, and 45-50% for the full year as we invest in product development, including Model 3, and expand our sales capability,” the company said in the shareholder letter.

Another near-sure question for the call: How about demand for the Model S and the future of its direct sales model?

Tesla launched a referral program last week to give $1,000 to new car buyers who use a referral link from a previous buyer. The current Model S owner would get $1,000 off a new car, services, or accessories.

If the program is successful, Tesla may not have to open as many stores in the future, the company said.

The move was also part of a “guerrilla battle” with dealers, Musk said.

Tesla, of course, sells its cars directly to customers, bypassing dealerships. It has been barred from selling its cars that way, however, in several states, including Texas.

Re: Tesla Energy – That will surely also lead to questions about the Gigafactory, Tesla’s large battery-production plant under construction near Reno, Nevada. Getting that factory online is key to Powerwall as well as the Model 3, which tesla wants to offer at a lower price point that needs the economies of scale that Gigafactory can add.

Analysts will also spend some time probing Musk about Tesla’s software update, expected to take the cars’ driver-assistance features to the next level.

On Friday, Musk tweeted that the company was “almost ready” to make its cars drive themselves on highways as well as parallel-park themselves. The last hurdle, he said, has been dealing with faded road marks and making sure the car is able to tell a skid mark from real road markings.

Tesla has been testing the features for months on highways between San Francisco and the Pacific Northwest.

Jefferies analyst Trevor Young points out that the one-week shutdown in the Fremont, Calif. factory will warrant more explanation during the call.

From the shareholder letter: “We just concluded a planned one-week Fremont factory shutdown and made changes in stamping, Model S body center, drive unit production, battery module and pack production and general assembly to allow for an elevated level of production and efficiency. Since Model S and Model X will both share the general assembly line, we used the week to validate the newly installed equipment by completely building several Model X test vehicles. This month, we plan to start painting Model X in our new paint shop well before transitioning Model S painting there, to help de-risk this portion of our overall production ramp.”

Young’s concerns about Tesla do not hinge on demand for the company’s cars. “It’s really production constraints,” he said.

Tesla says pre-owned program, which sells Tesla cars that owners trade in, recognized $20 million in revenue in the launch quarter. Letter also claims that it is helping Tesla reach new customers in different demographic. “A pre-owned Model S appears to have a wider buyer base with a younger demographic and broader geographic distribution across the U.S.,” shareholder letter says.

Reservations well over $1 billion, with no marketing and no advertising. Company is basically sold out. Tesla is expecting $40 million to $50 million for its stationary business in Q4 and maybe 10 times that number in Q1.

Tesla is targeting release of its software update to beta customers this month, and depending on how it is received, a wide release for the auto-pilot and auto-park features in one to two months after that, Musk says.

Really interesting question – Would Tesla sell self-driving cars to services like Uber or try to establish its own? Elon declines to answer, analyst says refusal to answer may be more telling than an answer would be.

Elon is stressing that the autopilot capabilities IS NOT the same as self-driving cars. Says system works best in traffic situation, where it can track and follow other automobiles, and that it will get better over time.

Follow-up question about the auto-pilot. Will it really be hands-off, feet-off?

Tesla wants to set the expectation that its auto-pilot will be like an airplane’s auto-pilot. Drivers won’t be able to go to sleep while their cars drive, Musk says. Software will get better over time.

Question about China. What exactly Tesla is doing differently in China besides offering a free charger to customers?

“China does have an unique set of challenges,” starting with its license-plate lottery, Musk says. “It has taken us a while” to get the exemptions from that lottery in most of China and Tesla is hopeful it will get the exemption for Beijing, he says.

In China and elsewhere, Tesla has got to build confidence over time, he says. “Just because people love it in California it does not mean they love it in other places.”

Gigafactory production (for Tesla Energy) expected to begin in first quarter of 2016. Elon says efficiency increasing quickly as they plan out production at Nevada battery-production factory, sounds like they’re confident that it will be running smoothly in time to boost Model 3 in 2017.

Musk clarifies that the $1 billion figure for Tesla’s batteries refers to reservations — which may be orders, or not. Tesla does not know how much market share it will have in the storage market, Musk says.

It was a retooling of both Model S and Model X lines, Musk says. For Model S, it increased the volume of cars the paint shop could handle. The company also made improvements in stamping, among other adjustments, he says.

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